Independent grocers turned around a two-year decline in profits in 2015 thanks to higher sales and better margins, according to NGA’s annual Independent Grocers Financial Survey, released Wednesday.
“A stronger 2015 once again proves the resilience of the independent grocer,” Robert Graybill, president and CEO of FMS Solutions Holdings LLC, which conducted the study with NGA, said in a release announcing the results. “In what are still uncertain economic times, independents managed to improve upon many financial indicators over 2014. While grocers in the Northeast continued to struggle after last year’s supplier turmoil, this year’s survey shows that they are headed in the right direction and are poised to continue to improve.”
The study polled independent supermarket operators in 38 states and four Canadian provinces about their financial performance and business strategies. It found that same-store sales at independents grew by 2.1% while food-at-home inflation was at 1.17% in 2015, resulting in adjusted sales gains of 0.84%. That’s a turnaround from a 0.9% decline in 2014. Sales sifted slightly away from non-perishable items toward perishable categories such as meat and deli. The number of average weekly transactions was flat, indicating that customers were spending more per visit.
Additionally, independents no longer see supercenters as their top competitive threat, according to the survey. Instead, they pointed to conventional supermarkets.
“In a fiercely competitive industry, independents are continuing to differentiate themselves in the marketplace and are doing so with much success,” NGA CEO Peter Larkin said in the release. “Despite a challenging environment, independent supermarket operators continue to evolve to serve their customers.”
Rising labor and benefit costs caused an increase in expenses in 2015; 71% of respondents said their healthcare costs increased in 2015. Minimum wage increases and rising turnover rates also were a concern.
Turnover rate for part-time employees was 42.2%, the survey found.
Nonetheless, higher sales and better margins (27.26% on average) resulted in a 1.44% increase in net profit before taxes, compared to 0.91% in 2014.
The survey also found that independents improved operational fundamentals, keeping inventory turns high and implementing programs to manage waste and theft-related losses.
Independent grocers also adjusted marketing strategies, shifting from print to digital, social media and mobile marketing, with social media now a normal part of marketing. Most respondents said they had several years’ experience in marketing via social media.